Chapter 1: Basic Concept of Planning
C1/1: Planning and Controlling
Basic Concept of Planning
Chapter 1: Basic Concept of Planning
When you study and understand this chapter, you will be able to:
? Know what we mean by planning. ? Be familiar with the nature of planning. ? Know the necessity and importance of planning. ? Understand and determine the main factors that affect the
planning effectiveness level. ? Distinguish and figure out the main steps to be followed in
planning. ? Acknowledge the planning subsystems. ? Figure out the different types of plans.
Introduction
1.1 Introduction
In recent decades, the term "planning and controlling" has become popularized widely in management circles. Most managers today ? in business and service organizations ? are at least familiar with this term and its general applications.
Planning and control are critical management activities regardless of the type of organization being managed. Modern managers face the challenge of sound planning and control in small and relatively simple organizations as well as in large, more complex ones, and in nonprofit organizations.
Planning: Its Meaning,
Nature, and Importance
1.2 Planning: Its Meaning, Nature, and Importance
1.2.1 Definition of Planning
Definition of Planning
There are many definitions for the term "planning," each person has his/her own ideas concerning the meaning of the term "planning." Among the most common definitions for this term are ? Planning is the process by which an individual or
organization decides in advance on some future course of action (Omran, 2002, p. 68). ? Planning is the process of determining how the organization can get where it wants to go (Certo, 2000, p. 126). ? Planning involves selecting from among alternative future
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Basic Concept of Planning
courses of actions for the organization as a whole and for every department or section within it. (Cook, Hunsaker, Coffey, 1999, p. 16).
The Nature of Planning
1.2.2 The Nature of Planning
The essential nature of planning can be highlighted by the four major aspects of planning: contribution to purpose and objective, primacy of planning, pervasiveness of planning, and efficiency of plans.
a)Contribution to Purpose and Objectives,
a) Contribution to Purpose and Objectives: The purpose of every plan and all derivative plans is to facilitate the accomplishment of enterprise purpose and objectives. This principle derives from the nature of organized enterprise, which exists for the accomplishment of group purpose through deliberate cooperation. This was emphasized by koontz when he said:
"Plans alone can not make an enterprise successful. Action is required; the enterprise must operate. Plans can, however, focus on purposes. They can forecast which actions will tend toward the ultimate objective, which tend away, which will likely offset one another, and which are merely irrelevant. Managerial planning seeks to achieve a consistent, coordinated structure of operations focused on desired ends. Without plans, action must become merely random activity, producing nothing but chaos." (Koontz et al., 1980, p. 157).
b)Primacy of Planning,
b) Primacy of Planning: Planning is the primary management function, the one that precedes and is the basis for the organizing, influencing, staffing, leading and controlling functions of managers. This can be shown in Figure 1.1.
What kind of organization
structure
Plans objectives and how to achieve them
What kind of people we need
and when
How most effectively to lead and direct people
By furnishing standards of
control
Figure 1.1: Planning precedes all other managerial functions
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Although all the functions intermesh in practice as a system of action, planning is unique in that it establishes the objectives necessary for all group effort. Besides, plans must be made to accomplish these objectives before the manager knows what kind of organization relationships and personal qualifications are needed, along which course subordinates are to be directed and led, and what kind of control is to be applied. And, of course, all the other managerial functions must be planned if they are to be effective.
c)Pervasiveness of Planning
c) Pervasiveness of Planning:
Planning is a function of all managers, although the character and breadth of planning will vary with their authority and with the nature of policies and plans outlined by their superiors. It is virtually impossible to circumscribe the area of choice where they can exercise no discretion, and unless they have some planning responsibility, it is doubtful that they are truly managers.
Recognition of the pervasiveness of planning goes far in clarifying the attempt on the part of some students of management to distinguish between policy making (the setting of guides for thinking in decision making and administration), or between the "manager" and the administrator" or "supervisor".
One manager, because of his or her authority delegation or position in the organization, may do more planning or more important planning than another, or the planning of one may be more basic and applicable to a larger portion of the enterprise than that of another.
However, all managers ? from presidents to supervisors ? plan. The supervisor of a factory crew plans in a limited area under fairly strict rules and procedures. Interestingly, in studies of work satisfactions, a principal factor found to account for the success of supervisors at the lowest organization level has been their ability to plan.
d)Efficiency of Plans
d) Efficiency of Plans:
The efficiency of a plan is measured by the amount it contributes to purpose and objectives as offset by the costs and other unsought consequences required to formulate and operate it. A plan can contribute to the attainment of objectives, but at too high or unnecessarily high costs. This concept of efficiency implies the normal ratio of input to output, but goes beyond the usual understanding of inputs and outputs in terms of pounds, labor hours, or units of production to include such value as individual and group satisfactions.
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Many managers have followed plans, such as in the acquisition of certain aircraft by airlines, where costs were greater than the revenues obtainable. There have actually been some aircraft with which an airline was to make no money. Companies have inefficiently attempted to attain objectives in the face of the unsought consequence of market unacceptability, as happened when a motor car manufacturer tried to capture a market by emphasizing engineering without competitive advances in style.
Plans may also become inefficient in the attainment of objectives by jeopardizing group satisfactions. The new president of a company that was losing money attempted quickly to recognize and cut expenses by wholesale and unplanned layoffs of key personnel. This result in fear, resentment, and loss of morale led to so much lower productivity as to defeat his/her laudable objective of eliminating losses and making profits. And some attempts to install management appraisal and development programs have failed because of group resentment of the methods used, regardless of the basic soundness of the programs.
The nature of planning can be figured out from these four major aspects of planning:
a. Contribution to purpose and objectives, b. Primacy of planning, c. Pervasiveness of planning, and
d. Efficiency of plan
The Importance of Planning
1.2.3 The Importance of Planning
The planning function has four important goals: a) To offset uncertainty and change. b) To focus attention on objectives, c) To gain economical operation, and d) To facilitate control.
a) To Offset Uncertainty and
Change
a) To Offset Uncertainty and Change
Organizational planning has two purposes: protective and affirmative. The protective purpose of planning is to minimize risk by reducing the uncertainties surrounding business conditions and clarifying the consequences of related management actions. The affirmative purpose is to increase the degree of organizational success.
Future uncertainty and change make planning a necessity. Just as the navigator cannot set a course once and forget about it, so the business manager cannot establish a goal and let the matter rest. The future is seldom very certain, and the further in the future the results of a decision must be considered, the less the certainty.
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Even when the future is highly certain, some planning is usually necessary. In the first place, there is the necessity of selecting the best way to accomplish an objective with conditions of certainty; this becomes primarily a mathematical problem of calculating on the basis of known facts, which course will field the desired result at the least cost. In the second place, after the course has been decided, it is necessary to lay out plans so that each part of the organization will contribute toward the job to be done.
Even when trends indicating changes are easily discernible, difficult planning problems arise.
Ex: The manufacture of television sets is a case in point. The change away from black and white to color television did not take place overnight. The manufacturer had to determine what percentage of production should be assigned to color sets and what to black and white and how to retain efficient production of both lines
b) To Focus Attention on Objectives
b) To Focus Attention on Objectives Because all planning is directed toward achieving enterprise objectives, the very act of planning focuses attention on these objectives. Considered overall plans unify interdepartmental activities. Managers, being typically immersed in immediate problems, are forced through planning to consider the future and even consider the periodic need to revise and extend plans in the interest of achieving their objectives.
c) To Gain Economical Operation
c) To Gain Economical Operation Planning minimizes costs because of the emphasis on efficient operation and consistency. It substitutes joint directed effort for uncoordinated piecemeal activity, even flow of work for uneven flow, and deliberate decisions for snap judgments.
The economy of planning is plainly seen at the production level. No one who has watched the assembly of automobiles in one of the larger factories can fail to be impressed with the way that the parts and subassemblies come together. This implies extensive detailed planning without which the manufacture of automobiles would be chaotic and impossible costly.
Although every manager sees the imperative economy of importance in other areas, it is occasionally left to chance and too great individual discretion.
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